Employment law is one of the most important legal areas in your entire startup, but it’s an area that’s easy for many startup founders to breeze over hastily.
If you don’t take care of it upfront, it will potentially haunt you in the long term. The good news is that many of these problems can be avoided if you do your due diligence.
In this post, we’ll share with you seven employment law tips for startups that will protect your business and help you move forward to achieve success.
- Get An NDA
An NDA (non-disclosure agreement) is one of the most important legal documents your startup needs.
The entire purpose of an NDA is quite simple – to protect any sensitive information in your business. This could be anything from innovative technology your company is working on, designs, trade secrets concerning your company all the way through to business operations.
Decide in advance what you consider sensitive information vital to the company’s operations and long-term profitability. Then get a customised NDA created that is checked over by a lawyer before you get all required parties to sign it before you work with them.
- Don’t Blur The Line Between Employee And Contractor
This is a tricky one and can catch many unsuspecting business owners because they simply don’t understand the distinction properly.
An employee is someone who is employed by your business. You pay them a contracted salary each week, month, etc. It also comes with associated costs like health insurance, taxes, benefits like sick and annual leave, and more. If someone is working for you in an environment where you control where and when the work is performed then they are most likely an employee.
Independent contractors are not employees. You pay fewer taxes for them, they pay for their own equipment, etc. The bottom line is that contractors are cheaper to hire and this is why many startup founders employ them
Don’t try and classify an employee as a contractor because if you get caught, you face serious fines and even more severe punishment. The most important thing you can do to ensure you get this right is speak with the right legal experts and make sure you understand the classifications of employees and contractors.
- Get Contracts Written For Employees
A contract is and should cover areas like the roles and responsibility of each employee. It should cover what their working hours should be, times they’re expected to work, holiday pay and procedure for taking leave, terms of termination and much more.
Essentially, what this does is lay out the terms and conditions of employment. If any of those terms are violated then you’re well within your legal rights to take action within the confines of the law.
- Understand Exempt And Nonexempt Employees
Another important area you must understand regarding your employees is whether or not they are exempt from overtime pay and other penalty rates. Again, this is another area where you don’t want to mess up as the potential fines and punishments can be severe. Not only will you get a large fine, but you’ll also still be required to pay the overtime and penalty rates owing.
Understanding whether or not an employee is exempt or not is a matter determined by the laws and regulations of each country and the respective states. If you really want to know, you need to speak to a legal expert as it varies.
- Get An Employee Handbook
This is different from an employee contract in that it doesn’t dictate and lay out the terms and conditions of employment. Instead, an employee handbook provided to all employees should cover areas such as:
- Harassment and discrimination policies.
- Disciplinary actions and procedures.
- Your behaviour and general conduct as an employee of the company.
- Stock agreements.
- Social media policies.
That is just a snippet of the kinds of things you can include in an employee handbook. Either way, you need one of these so you’re covered in all the important areas of business.
- Get All Required Legal Documents Professionally Created
Without a doubt, the democratisation of legal services has meant that many entrepreneurs and startup founders now use downloadable templates. While they do have their place in the world of legal documentation for businesses, the reality is that the only way you can be truly protected is by getting all your legal documents customised for each specific area.
Don’t be the startup that tries to bootstrap everything in order to minimise expenses. While bootstrapping is okay in some areas, you need to be smart about what areas you choose to bootstrap and legal documents isn’t one of them.
The world of employment law can seem like a minefield if you’re not careful. While the above tips will help you avoid mistakes that many other startups make, the only way to be really sure you’ve got all the important areas of employment law covered is to speak to a legal expert that specialises in this area.
If that sounds like you then get in touch with us today for some sound legal advice and a keen ear to lean on.